When a QIIP is charged to inheritance tax

Trust property, which is the subject of a qualifying interest in possession (QIIP), may become chargeable to inheritance tax on the following occasions:

1. •

   on the death of the beneficiary with the interest in possession

2. •

   on the death of the beneficiary within seven years after a transfer or lifetime termination of their interest

3. •

   on the transfer or conversion of the interest to a non-qualifying or discretionary interest during the beneficiary’s lifetime.

Property in which a QIIP subsists is not relevant property so it is not subject to principal (10-year) and exit charges during the life of the trust. See the Relevant property guidance note, and other notes in the ‘relevant property’ sub-topic for details of the relevant property tax